Tech stocks tumble, leading to concerns of a tech malaise

Technology stocks swooned Thursday, dragging down the rest of the market as analysts worried that consumers are oversaturated with devices -- and that the red-hot tech-stock days of 2013 are over.

The tech-heavy Nasdaq Composite Index fell 120.27 points to 4,054.11, a 3.1 percent drop and the biggest decline since Nov. 9, 2011, when it fell 3.88 percent. With the poor performance coming on the heels of a 1.18 percent Nasdaq decline on March 24, some analysts warned that the continuing malaise might signal bigger problems.

"There are a lot of people doing a lot of incremental stuff on top of each other," said Ken Dulaney of research firm Gartner. "How many ways can you sell songs? I don't think we have enough evidence to say there's a shake-up going on. All I can say is we have too many things that we don't need, too many ways to spend our money, too many things that are duplicative of each other. It just can't be that way."

The Nasdaq stumbled Monday but then bounced back, until Thursday's dramatic fall. Broader indexes such as the Dow Jones industrial average and the S&P 500 suffered smaller yet still substantial dips Thursday, with tech and biotech stocks taking the blame for the overall declines.

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The Dow fell 266.96 points to 16,170.22, a 1.6 percent decline. The S&P dropped 39.10 points to 1,833.08, a fall of 2.09 percent.

Tech analysts had chalked up the poor showing of tech stocks in March to a seasonal lull in the market in advance of quarterly earnings.

But Thursday, with name-brand stocks such as Facebook (down 5.21 percent) and Amazon (down 4.43 percent) continuing to struggle, some worried about a market correction. The Nasdaq is down almost 7 percent from its March 5 closing high of 4,357.

Compared to 2013, when Netflix stock was up an astounding 297 percent and Pandora followed with an 189 percent increase, Colin Gillis of BGC Partners said tech stocks are now showing "clear frothiness in the market, like the foam on your latte. If you were a professional investor in 2013, you had tremendous gains owning those names. So far in 2014, momentum in the (tech) market is clearly stalled. 2013 is over."

On Thursday, Netflix was down 5.18 percent and Pandora fell 10.45 percent.

Tim Bajarin, president of Creative Strategies, said tech stocks could rebound over the summer when consumers tend to download more books, videos and movies -- and see another bump in the fall when back-to-school shoppers tend to load up on tablets, smartphones and laptops.

"The first and second quarters are always soft," Bajarin said. "But, absolutely, this particular period is a bit more pronounced."

Biotech stocks were some of the hardest hit Thursday -- the Nasdaq Biotechnology Index fell 5.6 percent -- after the sector heated up in the first quarter, including a huge flow of initial public offerings.

Gilead Sciences, Silicon Valley's largest biotech company in terms of revenues, had soared after approval of a breakthrough hepatitis C drug. But the Foster City company's stock tumbled 7.3 percent to $65.48 Thursday as rival Merck received good news on its own offering in that area.